I Invested $16,000 into Fundrise, Here is What Happened (One Year Review)
Fundrise is a crowdfunding real estate investment platform that was founded in 2010 and launched in 2012. A fairly young company that first introduced the eREIT in 2015 that created a new way for investors to get access to commercial real estate investments.
The platform is a new alternative asset class to the more popular REIT’s. Unlike REIT’s, it provides a way to invest in private deals and get more exposure to capital appreciation on top of the rental income issued in a form of dividends.
The 3 Investment Plans
At the time of opening my account, only two options were available. The balanced and long-term growth plans. Supplemental Income plan was closed to all investors. I chose the balanced investing plan which consists of a mixture of focus between appreciation and Income.
The plan estimates an annual return between 8.8% to 10.1% total return. Historical average annualized returns for the last 5 years have been quite good. Let’s not forget, past performance does not guarantee future returns. Comparable to S&P returns for 2018 (-4.38%), the 9.1% return in Fundrise have been a great hedge against the year.
The Pros, Cons & Risks
Pros:
- Great way to diversify your real estate investments and get exposure to private commercial real estate deals.
- Low minimum investment amount starting at $500.
- Not exclusive to only accredited investors.
- Very passive form of real estate investing.
- Easy to use website with great transparency on current and ongoing investment projects.
- Diversified risk exposure.
- 90 day money back promise. Fundrise will buy back your investments at the original price you paid for the investment regardless of the change in asset price. There are some restrictions to this offer such as a waiting period of 60 days after submitting your request.
- Great easy to use smartphone app.
- Low management fee of 1% (Advisory fee: 0.15% & Management fee: 0.85%)
- Dividend growth
Cons:
- Liquidity is limited to specific quarterly windows where you can make your withdrawals without penalty.
- The income you earn is taxed as ordinary income, unlike qualified dividends where they are taxed at a 15% tax rate.
- Can’t choose individual projects to customize portfolio.
Risks:
- Crowdfunding is still a fairly new platform and has yet to be tested during market downturns.
The Investment
It has been 1 year since I have opened an account back in April of 2018 with Fundrise. My experience thus far has been a pleasant and interesting one. Having some experience investing in private real estate deals, I found investing in Fundrise a fun and also an educational experience. The periodic updates on the projects were enjoyable to read.
The deposits
eREITS: $16,500
iPO: $4,995.60
Portfolio Summary
As of this writing the portfolio currently has 132 active projects. 42% are in debt and 58% in equity offerings.
The offerings are categorized in the following 9 funds. Each fund focuses on a specific investment mission. The weight of your investments diversified in each fund will differ depending on the investment plan you choose.
The remainder of the capital invested is in the Fundrise iPO (internet public offering) shares. Fundrise periodically issues security offerings of their company’s class B common stocks once to twice a year. The last offering was in November of 2018, for $6.90 per share. I acquired 724 shares at $6.90 in total of $4995.60. I will keep you guys updated on this iPO investment as I get updates.
The Return
My total invested deposit of $16,500 was made incrementally over the months. To calculate my total return, I used XIRR to determine my return.
Total dividend income: $547.90
Total Appreciation: $505.35
Total Return/$: $1053.25
Total Return: 7.8% (Excludes iPO investment)
Dividend Growth
The last 3 dividend payouts observed had some dividend growth. There were no additional investments made during those periods.
October 2018 – $160.30
January 2019 – $162.82 (+1.6% Increase)
April 2019 – $165.91 (+1.9% Increase)
The growth in dividend payouts may not be as consistent as some dividend aristocrat stocks but I sure am looking forward to seeing more efforts to grow the dividends. That would be great. This does not guarantee that dividends can’t go south so investors should have open expectations on this front.
Conclusion
Returns look promising. I like the exposure i’m getting into the Los Angeles real estate markets. Having owned and sold property in Los Angeles, I do have some knowledge in this market. I only wish I can specifically choose which projects I wish to add onto my portfolio. If I could, I would probably allocate more money into the Los Angeles eFund. A feature I hope they implement in the future.
The platform with its simple and modern UI is refreshing and a great way to track your investments. The passive nature of the investment is also attractive. Being a landlord that managed my own properties, it’s nice not having to deal with tenant issues and unexpected maintenance at a fee of 1%.
Due to the unknowns, of how Fundrise will perform during market volatility, It’s probably wise to diversify and factor your total real estate investment allocation appropriately tailored to your risk appetite.
So far I do like the platform and it is a great and easy way to get some exposure to private commercial deals. I will continue investing into the platform and keep you guys updated.
Thank you for reading.
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Current Rating:
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As of: 2019-4-11
18 Comments
Joe Sahinen
I am curious if you can post/email me any change in the iPO investment after this next August offering? I’d love to see if there is any change in NAV from offering to offering as valuations grow, even if you can’t necessarily exit the position. I will likely be participating in the next offering and would be interested to see how it works first hand.
Kevin
Hello Joe! I will be putting up an update on the IPO soon! Thanks for stopping by!
Steve
I recently invested $5,000. It says I need to invest another $5k to move to the advanced level.
Do you know what it takes to become a premium member (4th level)?
Kevin
Hello Steve! From my understanding you must invest $100,000 for the premium level. The primary benefit of the premium account provides 365 days of RIA fee waiver for all referrals. Fundrise states they will continue to bring new benefits to the premium level later in the future. It seems the benefits for being a premium level account holder is not much intriguing at the moment.
Steve Cascio
Thanks for the info 🙂
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LAWRENCE P PARENT
I invested just $1,000 about 8 months ago. My return in the same fund is 2.9%. I’ve written several times but can’t get a good answer why so low when each time something is sold they boast how it paid the fund 7-13%! So far, my small investment is paying about the same as a CD but with more risk.
Kevin
Hi Lawrence,
Your return is highly dependent on when you make your initial investment. Most of my gains are from funds that have completed the ramp up stage over a year ago. So not all investors will see the same returns as some funds close out and new ones open up.
LAWRENCE P PARENT
I appreciate your comment, Kevin! It just seems that there’s no way of know what I’ll have in a year. While no investment guarantees anything, what’s to stop them from paying me 3% next year and you 9%. I don’t see a pro-rated formula to help me understand. Like “we sold XYZ property and it paid “US” 13%. If you’ve been with us 5 years, you get 13% too. If you’ve been here between 5-13 years, you’ll get 5%”, etc…instead it’s like, we’ll decide what you get and there’s nothing you can do about it. Sigh….Maybe I’m missing something. Be happy to keep adding to it, if I could see where/how my share is calculated. Thanks. again.
Bob Smith
It also depends on which portfolio’s (which specific eREITs) and investment styles (Growth, Balance, Income) that you have chosen. The suggested rates of return are over time and don’t guarantee a return in a year. Real estate projects take time to ramp and and become operating so while they may have completed and investment, you likely missed out on the returns from having only recently allocated. 8 months is not sufficient enough time.
John Boone
I’m wondering if you can use an IRA through a different broker than their partner broker. I can’t find any info on that.
Kevin
Interesting question. It looks like Fundrise is only partnered with Millennium Trust Company but open to other partnerships down the road.
PJ Bhakta
how do i get the fundrise ipo money back?
Kevin
Investing in Fundrise iPO is a highly illiquid investment. You should expect to make your money when the company considers a sale or a registered initial public offering. That can take anywhere from months to even years. No one knows.
desidividend
Do you have an update for the latest Quarter,are your dividends increasing or decreasing.